GM And The UAW: Sanity, At Last

GM’s (NYSE: GM) bankruptcy was cause by three things, and one of those was labor costs. The car company and the UAW have set a reasonable agreement as they finish contract negotiations and it may be the first sane one in decades.

GM was taken down by a poor economy, awful decisions by management about products, and labor costs which no manufacturing company could carry. The average earning of a worker prior to GM’s Chapter 11 filing was $75 when salary and all benefits were factored in. By most estimates this was about three times what the typical manufacturing worker in the US earned then.

The new GM-UAW agreement gives the union some concessions that allow the organization’s management to take back to workers..something which shows they have forced the profitable auto-maker to pass on its prosperity to those who work on the assembly lines. The average entry level worker will make $2 to $3 more than under the last contract, according to media reports. This will lift the entry level wage to about $16.

The next aspect of the new contract is a bribe of sorts. If a majority of the union votes in favor of the deal, all members will receive a $5,000 bonus. GM would have been smarter to only give the $5,000 to those who vote for the deal. That would make the bribe process complete. Unfortunately, the vote is secret. Bloomberg says the bonus will cost GM a paltry $242 million based on a union membership of 48,500.

GM will also re-open a plant in Tennessee which made vehicles that bore the failed Saturn brand badge. It is an irony that the UAW should gain something from one of GM’s most terrible mistakes.